Closing your Florida limited liability company (LLC) will involve a variety of tasks. Among the most important are what is known as dissolving and winding up the business.
Note: Florida’s current LLC Act will be repealed on January 1, 2015. This article is based on the current version of the Act.
Dissolving Your LLC
Your LLC is registered with the State of Florida. Officially ending its existence as a state-registered business entity, and putting it beyond the reach of creditors and other claimaints, begins with a formal process called “dissolution.” While an LLC may be involuntarily dissolved through a court decree, or for administrative reasons such as failing to file an annual report or pay a fee, this article covers voluntary dissolution by the LLC members.
In order to voluntarily dissolve your LLC, you first should look to the company’s formational documents—the articles of organization and operating agreement. In most cases, one of those two documents will contain a section with rules for how to dissolve the company. Typically the rules will require a vote of the LLC members on a resolution to dissolve, and more specifically a requirement that some percentage of members vote in favor of the resolution. Make sure you follow any specific procedural requirements that may be part of the dissolution rules, such as setting a specific time to meet and vote and giving advance notice to all members regarding the meeting.
Also, unless your articles of organization or operating agreement state otherwise, Florida’s LLC Act allows for an alternative method to voluntarily dissolve an LLC: written consent of all LLC members.
For either approach to dissolution of your LLC—relying on rules in formational documents or on unanimous written consent—you should make sure to record the decision to approve the dissolution in the official minutes of the dissolution meeting or on a written consent form.
By the way, be aware that dissolution, alone, does not prevent a new legal proceeding, or abate an existing legal proceeding, by or against your LLC.
Following dissolution, your LLC continues to exist only for the purpose of taking care of certain final matters that, collectively, are known as “winding up” the company. You may choose to designate one or more LLC members or managers to handle the winding up.
Under Florida’s LLC Act, key winding up tasks include:
- collecting LLC assets
- disposing of LLC property that will not be distributed in kind to members
- discharging or making provision to discharge the LLC’s liabilities; and
- distributing LLC assets to creditors and to members.
When it comes to the last two listed items, discharging liabilities and making distributions to members, you are required to make payments in a particular order. First, you must pay creditors, including LLC members who are creditors, to the extent permitted by law. Note that it is particularly important that you pay all outstanding taxes. Next, unless otherwise provided in your operating agreement, you must pay current and former members any required “interim distributions” and any distributions due to members who have withdrawn from the company. (Interim distributions generally are approved payments to members unrelated to dissolution.) Finally, unless otherwise provided in your formational documents, you must distribute any remaining assets to members pro rata in proportion to their then-current percentage, or other interests in the profits, of the LLC.
Notice to Creditors and Other Claimants
One other key task is giving notice to creditors and other claimants of your LLC's dissolution. Giving notice is optional. However, doing so will help limit your liability and also allow you to more safely make final distributions to members.
Under Florida law, one way to give notice is by sending a written document directly to known claimants after dissolution. Proper written notice must:
- provide a reasonable description of the claim that the claimant may be entitled to assert
- state whether the claim is admitted or not admitted, in whole or in part, and, if admitted: (a) the amount that is admitted, which may be as of a given date, and (b) any interest obligation if fixed by an instrument of indebtedness
- provide a mailing address where a claim may be sent
- state the deadline, which may not be less than 120 days after the date of the written notice, by which confirmation of the claim must be delivered to the dissolved LLC; and
- state that the LLC may make distributions after the deadline to other claimants and LLC members or former members without further notice.
LLCs that give written notice in this form must also given the same type of notice to persons with claims that are “contingent upon the occurrence or nonoccurrence of future events or otherwise conditional or unmatured,” along with a request that those persons present their claims in accordance with the terms of the notice.
There are quite a few additional rules for how to handle existing and future claims. Therefore, while there are advantages to giving written notice of your LLC’s dissolution to individual claimants, if you choose to give notice you should strongly consider getting assistance from a business attorney.
Articles of Dissolution
After dissolving your LLC, you must files articles of dissolution with the Department of State (“DOS”). The filing may either be done on paper or online. Your articles of dissolution must contain certain basic information about your dissolved LLC, including:
- the LLC’s name
- the effective date of dissolution
- a description of the occurrence that resulted in the LLC’s dissolution pursuant to statute (such as written consent of all members)
- a statement that all LLC debts, obligations, and liabilities have been paid or discharged, or that adequate provision has been made to pay or discharge, pursuant to statute
- a statement that all remaining LLC property and assets have been distributed among the members in accordance with their respective rights and interests; and
- a statement that there are no suits pending against the LLC in any court or that adequate provision has been made for the satisfaction of any judgment, order, or decree which may be entered against the LLC in any pending suit.
An articles of dissolution form, available for download from the DOS, also requests that you provide the date on which your LLC’s articles of organization were filed and the DOS-assigned document number. You will also need the DOS document number if you use the DOS’s online filing system.
There is a $25 fee to file the articles. An optional certified copy of the processed articles is available for an additional fee. Filings on paper usually will be processed within about one week. Online filings should be processed within 2-3 days.
Be aware that your business name will become available for use by others 120 after the effective date of dissolution.
Florida does not require that you obtain tax clearance before dissolving your LLC.
For federal tax purposes, check the “final return” box on your IRS Form 1065 (if your LLC is classified as a partnership for tax purposes) or IRS Form 1120 (if your LLC is classified as a corporation for tax purposes).
Is your LLC registered or qualified to do business in other states? If so, you must file separate forms to terminate your right to conduct business in those states. Depending on the states involved, the form might be called a termination of registration, certificate of termination of existence, application of withdrawal, or certificate of surrender of right to transact business. Failure to file the additional termination forms means you’ll continue to be liable for annual report fees and minimum business taxes.
You can find additional information, including forms, mailing addresses, and access to the online filing system, on the DOS website.
For information on dissolving and winding up LLCs formed in other states, check Nolo’s 50-state series on dissolving LLCs.
Final Advice: Dissolving and winding up your LLC is only one piece of the process of closing your business. For further, general guidance on many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.